Car retailer Marshall Motor (MMH:AIM) has continued to trade strongly since reopening showrooms in June, and following a bumper performance in the important September plate-change month now expects to generate an underlying pre-tax profit of £15 million for the year to December 2020.
That marks a major upgrade on the break-even target outlined alongside August’s interim results and combined with the news Marshall Motor has taken tough but necessary restructuring measures, drove the shares 10.4% higher to 132.5p on Tuesday.
MAJOR UPGRADE
Marshall Motor, whose attractions we highlighted here in February before the pandemic struck, is now targeting a £15 million underlying pre-tax profit for 2020. Unsurprisingly, given the impact of Covid-19, that is down from the £22.1 million generated in a far less turbulent 2019, yet it is also materially ahead of the guidance given as recently as August.
Given the firm's dealerships were closed for a large proportion of the first half - during the lockdown period beginning on 23 March to the reopening of showrooms from 1 June - causing the company to post a first half underlying pre-tax loss of £8.9 million, this is an amazing result.
PENT-UP PROFITS
In today’s update, Marshall Motors said it continued to trade strongly through the remainder of August and, importantly, during the key plate-change month of September, benefiting from the ongoing release of pent-up demand in both vehicle sales and aftersales following the Covid closure period.
In addition, the company ‘significantly outperformed’ the wider new vehicle market in the third quarter and notably in September, seeing similarly strong trading in both used vehicles and aftersales.
The Society of Motor Manufacturers and Traders (SMMT) reported that new vehicle retail registrations were down 1.1% in September. However Marshall Motors’ like-for-like new vehicle retail sales grew by a market-beating 19.1% last month, with its total new vehicle retail sales up 38.6%.
‘Our strong culture, brand partnerships with scale, in-house technology platform and online presence, coupled with our exceptional colleagues have enabled the group to significantly outperform the wider automotive retail market through this important post-lockdown trading period,’ enthused chief executive Daksh Gupta (pictured below).
He added that Marshall’s ‘operational performance in August and September, in particular, was strong across all key like-for-like new vehicle sales metrics and we have also delivered significant like-for-like growth in both used car sales and aftersales.’
UNCERTAIN ROAD AHEAD
Yet Gupta also flagged a number of uncertainties for the rest of the year and beyond. In the third quarter, the market was boosted by pent-up demand for new and especially used vehicles. Allied to restricted supply, this ‘created favourable conditions from which the group was very well positioned to benefit’.
For these reasons, Marshall Motor has ‘taken appropriate actions in terms of limited business closures and restructuring measures to ensure the group is well placed to meet these potential future challenges.’
Considering the ongoing impact of coronavirus could last until ‘at least’ Spring 2021, Marshall Motor also cautioned its guidance is given ‘in an environment where there are still significant ongoing economic and social uncertainties caused by Covid-19, together with the potential impact of the UK’s departure from the European Union on 31 December 2020, and so the risks to the board’s guidance are much higher than in a normal year.’
